It used to be that the great Australian dream was all about owning your own home on a quarter acre block, but soaring property prices ­­– particularly in Sydney and Melbourne – have locked a lot of would-be buyers out of the market.

Rentvesting is a realistic alternative. It means opting to buy/build an investment property in a more affordable suburb and getting a tenant in there to help pay down your mortgage while you rent-to-live somewhere else that more closely fits your lifestyle.

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Why consider rentvesting?


Rentvesting can mean breaking into the property market sooner than if you bought-to-live, with a smaller deposit and mortgage, plus first-time buyers may be able to access government grants.
Getting on the property ladder sooner and more affordably opens up the potential of building a property portfolio, or buying your dream home down the track. ­

With rent often seen as “dead money,” rentvesting means you’re thinking smarter, paying down a mortgage at the same time and opening up your investment opportunities without sacrificing the lifestyle you value most.

As a rentvestor, you have the flexibility of growing or downsizing where you rent as you need without coughing up some of the expensive change-over costs like legal bills or stamp duty involved in owning.

You may also be able to claim interest payments on your investment property as a tax deduction, providing they are greater than your rental income and as long as it is rented or available to rent. There is the possibility to tax deduct losses like repairs, renovations and depreciating property value if you’re negative gearing.

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What you need to know

  • As a rentvestor, you are owner and landlord. Sure, your tenant will most likely cover the majority of your mortgage, which is great. But as their landlord, you are also responsible for additional costs including repairs, landlord insurance and body corporate fees.
  • As a result, you’ll need to make sure you have a big enough buffer in the bank to cover both the expected and unexpected bills.
  • Think about who is going to manage the property. If that’s not you, then hiring someone will likely incur further costs.
  • Like all things in life, it pays to do your research. When choosing where to buy, look at things like vacancy rates ­­– how likely are you to get a tenant in the home you’re interested in buying? – and rental yield – the income generated by your property annually as a percentage of its value, minus costs.
  • You’ll need to get clued up about rental leases (your own and that of your tenant) so you understand the impact of tenant notice periods.  
  • Many rentvestors eventually sell their investment property to help purchase their live-in home. Keep in mind that when you do, you might be liable for capital gains tax.

You can read more about capital gains here.

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Seek good advice


Director of mortgage management business FinancePath Chris Collard says it’s vitally important to seek out financial advice if considering the rentvesting route.

“I recommend finding someone skilled enough to ask you the right questions and help you work out your purpose because property investment isn’t always right for everyone. Anyone can use an online calculator and find out what their borrowing power is, the question is how much can you afford while maintaining your lifestyle and ensuring you can sleep at night?”

Choose a reputable third-party builder if you’re considering building to rent.

By choosing Metricon, you have more than 40 years of experience behind you and a Lifetime Structural Guarantee* so you can be confident you’re investing in quality. You also have the opportunity to walk through one of our display homes before making any investment decisions.

First-time buyers could consider HomeSolution by Metricon’s home, land and finance packages which are a popular choice for rentvesting.


 
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